On March 8. 1988, the ECJ issued its decision in the case C-102/86 (Apple and Pear Development Council).
Context: Value added tax – Supply effected for consideration – Meaning of ‘consideration’ in Community law – Statutory body funded by mandatory levy on growers – Whether mandatory charge constituted consideration for services – Sixth Council Directive (77/388/EEC), Art. 2, para. 1.
Article in the EU VAT Directive
Article 2 of the Sixth VAT Directive
The following shall be subject to value-added tax:
(1) the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such;. . .
- The Development Council was established in 1966 by a statutory instrument made under the Industrial Organization and Development Act 1947 at the request of the growers. A statutory instrument of 6 May 1980 (the Apple and Pear Development Council Order 1980, SI 1980, No 623) (hereinafter referred to as ‘the 1980 Order’), as subsequently amended, lays down the rules by which the Development Council is now governed.
- It appears from the documents before the Court that the Development Council’s functions relate essentially to advertising and the promotion and improvement of the quality of apples and pears grown in England and Wales.
- The Development Council is authorized under the 1980 Order to impose on growers a mandatory annual charge at a rate not exceeding a specified amount in respect of each hectare of land planted with apple or pear trees or, in certain circumstances, a specified amount in respect of every 50 apple or pear trees planted on a grower’s land. The charges are levied to enable the Development Council to meet the expenses incurred or to be incurred by it in the exercise of its functions.
Does the exercise by the Apple and Pear Development Council of their functions pursuant to Article 3 of the Apple and Pear Development Council Order 1980, SI No 623 (as amended by the Apple and Pear Development Council (Amendment) Order 1980, SI No 2001) and the imposition on growers pursuant to Article 9 (1) of an annual charge for the purposes of enabling the Council to meet administrative and other expenses incurred or to be incurred in the exercise of such
functions, constitute “the supply of. . . services effected for consideration” within the meaning of Article 2 of the Sixth Council Directive of 17 May 1977 on the
harmonization of the laws of the Member States relating to turnover taxes?
The phrase “the supply of… services effected for consideration” in Article 2 of the Sixth VAT Directive does not apply to the situation where a body set up by the legislation of a Member State exercises pursuant to that legislation the functions of improving the efficiency of production, keeping up the quality of the products and enhancing the sales of the products in a particular sector of agriculture and imposes on growers pursuant to that legislation an annual charge for the purpose of enabling it to meet administrative and other expenses incurred or to be incurred in the exercise of such functions.’
The costs of the parties to the main proceedings are a matter for the national court. The costs of the Commission and of the Member States which have submitted observations in these proceedings are not recoverable.
The exercise by the Apple and Pear Development Council of its functions pursuant to Article 3 of the Apple and Pear Development Council Order 1980, SI No 623 (as amended by the Apple and Pear Development Council (Amendment) Order 1980, SI No 2001) and the imposition on growers pursuant to Article 9 (1) of an annual charge for the purpose of enabling the Development Council to meet administrative and other expenses incurred or to be incurred in the exercise of such functions do not constitute ‘the supply of .. . services effected for consideration’ within the meaning of Article 2 of the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value-added tax: uniform basis of assessment.
Summary / Comments
The Apple and Pear Development Council (hereafter: Apple and Pear) is concerned with the promotion of the common interests of the growers. The services Apple and Pear provides benefit the entire industry. If individual apple and pear growers enjoy benefits, it is as an indirect result of the benefits benefiting the entire sector. It cannot be ruled out that under certain circumstances only apple growers or only pear growers could benefit from the services provided.
Furthermore, there is no correlation between the magnitude of the benefit that individual growers receive from Apple and Pear’s services and the amount of mandatory contributions they are required to determine. These contributions are not imposed as a contractual, but as a statutory contribution, regardless of whether or not a grower benefits from a specific service from Apple and Pear.
It follows that the mandatory contribution imposed on growers is not consideration directly related to the benefits accruing to individual growers from the activities of Apple and Pear. In those circumstances, the exercise of activities is not a service provided for consideration.
According to the CJEU, in the performance by Apple and Pear of the activities assigned to it by statutory regulation, and the imposition on the fruit growers of an annual fee to cover the costs incurred by Apple and Pear in the performance of those tasks, therefore there is no question of services provided for consideration.
Compulsory payments, even in kind, cannot be easily considered as giving rise to onerous transactions (judgments of 8-3-1988, Apple and Pear Development Council, C-102/86, and of 22-6-2016, Cesky rozhlas, C-11/15), although the both of referred cases relate to situations in which the conclusion reached by the ECJ also relied in other of their circumstances, specially in the lack of any kind of proportion between the theorical services provided and the level of utilities or benefits for their recipients and the considerations paid by them. The same exclusion from the scope of the tax can be applied for the payment in kind of tax debts (judgment of 11-5-2017, Posnania Investment, C-36/16), although the conclusion of this case is far from clear.
Similar ECJ cases
- Cesky rozhlas, C-11/15